Total Sees Output Increase Through 2017 as Spending Peaks

Total SA (FP), Europe’s third-biggest oil company, said annual production will rise in the next three years as capital expenditure peaks.

Total will start up projects in Norway, Angola and the North Sea in the coming months and keep output growth targets, the company said in a statement today. Capital spending is expected to fall to $24 billion to $25 billion in 2015 to 2017 compared with $28 billion to $29 billion this year, according to Chief Financial Officer Patrick de la Chevardiere.

“The biggest part of the investment program is now behind us,” Chief Executive Officer Christophe de Margerie said during a presentation to brief investors on strategy. “The next step is to bring the cash in.”

De Margerie has pledged to raise oil and natural gas output, explore more aggressively for new deposits and sell assets. A second-quarter production increase was the first year-on-year gain since the last three months of 2010. The explorer has also set a goal of $15 billion to $20 billion in asset sales from 2012 to 2014.

The shares rose as much as 1.6 percent and were trading 57.5 cents higher to 42.95 euros at 10:40 a.m. in Paris

“The group anticipates investments to trend down starting in 2014 as it enters a growth phase for production and free cash flow,” Total said in a statement. Total expects a “strong increase in cash flow from upstream startups and downstream restructuring.”

High Potential

Total is planning to drill “high potential” wells in the Gulf of Mexico, Iraq, Brazil and Angola by the end of 2014, it said today.

The oil explorer reiterated a goal to raise output potential to about 3 million barrels of oil equivalent a day in 2017 and said it would reach 2.6 million barrels of oil equivalent a day in 2015. Production advanced 1.3 percent to 2.29 million barrels of oil equivalent a day in the second quarter.

The number of projects starting up in the next three years will almost double compared with the previous three, Total said in a presentation. It also plans to sanction investment in the Yamal LNG project as well as one at Fort Hills in Canada this year, both of which would begin production in 2017.

Total confirmed a target to reduce its European refining and petrochemicals business by 20 percent from last year to 2017. It pledged to raise a profitability target to 13 percent from 9.5 percent currently for the division overall while lowering capex 30 percent through 2017.

Growing Markets

In the marketing and services division, Total plans to “adapt its positions in Europe and expand in growing markets particularly in Africa and the Middle East,” it said.

The number of retail stations in Africa and the Middle East will increase to 5,400 in 2017 from 4,400, Total said.

As the biggest refiner in western Europe, where it operates eight plants including five in France, the company has borne the brunt of lower margins and a drop in the consumption of fuel products.

“Consumption and demand are declining in Europe,” de la Chevardiere said today at a press conference in London. “We may reduce capacity of some plants.”

The explorer won’t close a European refinery in the next two years, he said.

As well as investing in new fields, Total has sold assets such as a gas network in France and a field offshore Nigeria.

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net; Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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